Trade and trust – the power of interdependence

The United States-Mexico-Canada Agreement (USMCA) is far more than just a trade pact. It is a framework for economic cooperation, designed not only to increase trade, create jobs, and foster cross-border investment, but to build enduring relationships between three of the world’s largest economies. A key to the USMCA’s success lies in its application of interdependence. This model reveals how repeated interactions and cooperation over time can build trust, mitigate the risks of short-term self-interest, and ultimately create a system of mutual benefit.

Julio Espinoza

The concept of interdependence in negotiations highlights how the choices of each party can significantly impact the outcomes for all involved. When faced with a single negotiation, the focus may naturally fall on immediate gains, potentially leading to less-than-ideal results for everyone. However, when these negotiations are ongoing and repeated, a different dynamic emerges. Recognizing the value of continued interactions, countries are incentivized to prioritize cooperation and seek mutually beneficial solutions, leading to sustained and mutually advantageous outcomes. This understanding of interdependence is central to the USMCA and the framework’s success.

In practice, applying this understanding of interdependence within the USMCA means recognizing the long-term stakes of these relationships and prioritizing cooperation over short-term gains. For instance, Mexico’s agreement to raise labor standards was reciprocated by the U.S. ensuring continued agricultural market access. This cycle of mutual concessions creates a stable and predictable environment for both nations. With $700 billion in annual trade between the U.S. and Mexico and over $600 billion in trade with Canada (U.S. Census Bureau, 2023), this trust-based collaboration strengthens the economic foundation of North America.

This approach, which emphasizes interdependence in negotiations, not only addresses current trade issues but allows for the flexibility to adjust priorities over time. Canada, for example, values continued access to U.S. markets for dairy and timber, while Mexico focuses on infrastructure and labor reforms. The U.S., in turn, seeks protection of intellectual property and reducing trade imbalances. The $112 billion U.S. trade deficit with Mexico in 2022 (U.S. Census Bureau, 2023) underscores the necessity of ongoing negotiations to address imbalances and ensure fairness. By engaging in repeated negotiations and adjusting priorities incrementally, all three countries ensure the durability of their trade relationships.

The impact of the USMCA has been significant. The agreement has already created more than 76,000 new jobs in the U.S., expanding opportunities in agriculture, digital trade, and intellectual property protection (U.S. International Trade Commission, 2023). The combined $1.7 trillion in annual trade between the U.S., Mexico, and Canada underscores the deep interdependence that has been built through years of reciprocal cooperation and mutual trust.

However, the success of this framework faces external challenges. The rise of BRICS (Brazil, Russia, India, China, and South Africa) as a growing economic bloc is reshaping the global trade landscape. Together, BRICS countries represent 24% of global GDP and over 40% of the world’s population (Statista, 2023), and their growing influence presents a real challenge to North American dominance. The Belt and Road Initiative launched by China, projected to cost $8 trillion by 2049 (China Daily, 2023), shows how new trade routes and partnerships could shift global economic power.

To counter these challenges, the U.S., Mexico, and Canada must remain united under the USMCA, ensuring that their cooperation continues to evolve. Mexico is the largest market for U.S. agricultural exports, valued at over $20 billion annually (U.S. Department of Agriculture, 2023), and the U.S. benefits from continued access to $3.5 billion worth of Canadian dairy products each year (U.S. Department of Agriculture, 2023). These reciprocal trade arrangements are the direct result of the iterative, trust-based negotiations supported by the USMCA.

Another critical success of the USMCA is its protection of intellectual property, which has already generated $2.8 billion in additional revenue for U.S. companies (U.S. International Trade Commission, 2023).

The evolving global economic landscape, particularly the rise of China, underscores the need for continued strategic cooperation under the USMCA. The $1.7 trillion in annual trade between the U.S., Canada, and Mexico is a testament to how trust, iterative cooperation, and long-term thinking can ensure continued prosperity in the face of external pressures.

Julio Espinoza is an international trade analyst with Molera Alvarez LLC.

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